Not every plastic card is a debit card. That’s a pretty important fact to grasp if you’re thinking of trying to compare debit cards.
Credit versus debit
Firstly, there are debit cards and credit cards.
Credit cards typically bring with them a credit limit – something that you may see as a permanently available loan. They may also bring with them an outstanding balance and the implications that may have for debt and interest charges.
By contrast, a debit card is a plastic card that makes payment directly from a source of your money.
That may be your bank account. In the case of a debit card, if you overspend on the balance sat in your bank account and go overdrawn, this may attract a fee and / or interest charges from your bank!
There is also a prepaid debit card. This is not really a debit card at all as the money is not debited from a bank or other account. The balance is taken directly from your prepay card, so once you’ve spent the balance on the prepaid card, you cannot overspend or run up debt.
Standard debit card versus a prepaid debit card
Potentially, there are now two forms of debit card – something that’s quite important to understand when trying to compare debit cards. Just to recap …
The first is the conventional bank account debit card. When you use the card, the spending is deducted from your bank account.
If you have an overdraft facility (and sometimes even if you do not) you can use the card to spend more than you have available in hard cash.
The newer form of debit card is the prepaid card. In that case you load an amount of money onto the card (perhaps through a PayPoint outlet) and you use the card as per any other form of card.
The difference is that you cannot spend more than you have previously loaded onto it.
Prepaid debit cards versus bank debit cards
What’s the most suitable solution for you will depend upon your individual circumstances.
In the case of a prepaid card, typically you won’t run the risk of running-up debt and incurring unauthorised overdraft fees if you get your sums wrong.
You also typically won’t need a bank account and as no credit is involved, you won’t have to meet any credit check criteria.
That may help you control your finances and have access to the flexibility of plastic even if you have a shaky credit history.
The prepaid debit card may be an important contender in terms of options open to you, when you’re going to compare debit cards.
